Costly capital reallocation and energy use |
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| Affiliation: | 1. School of Physics, Faculty of Sciences, Aristotle University of Thessaloniki, GR54124, Thessaloniki, Greece;2. University Ecclesiastical Academy of Thessaloniki, Department of Management and Conservation of Ecclesiastical Cultural Heritage Objects, Thessaloniki, Greece;3. Technological Educational Institute of Thessaly, Larissa, Greece;4. Painting Conservator, ‘Esaeitechnon’ Artwork Conservation Laboratory, GR60100, Katerini, Greece;5. Ephorate of Antiquities of Larissa, GR41500, Larissa, Greece;1. IREGE, University Savoie Mont Blanc, 4 chemin de Bellevue, 74940 Annecy-le-Vieux, France;2. Paris School of Economics, University Paris 1 and CESifo, UK |
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| Abstract: | In time series data, energy use does not change much with energy price changes. However, energy use is responsive to international differences in energy prices in cross-section data across countries. In this paper we consider a model of energy use in which production takes place at individual plants and capital can be used either to directly produce output or to reduce the energy required to run the plant. We assume that reallocating capital from one use to another is costly. This turns out to be crucial for the quantitative properties of the model to be in conformity with the low short-run and high long-run elasticities of energy use seen in data. |
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